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Date of article: 17 May 2010
Last updated: 17 May 2010

Preparing for year-end - keeping your SMSF in order

Counting down to 30 June, its that time of the year again... housekeeping tasks to help you prepare for the financial year-end.

Contributions

If you are thinking of making personal non-concessional contributions, that is contributions you make voluntarily and no tax deduction is claimed, you need to ensure the contributions is made before 30 June. You should also make sure that you are not exceeding the non-concessional contributions cap.

Although not as generous as prior year, the opportunity for Government co-contribution is still available, if you qualify. The Government co-contribution rate for 2009-2010 financial year is 100 per cent. The Government co-contribution is subject to an income test. The matching rate will reduce where personal income exceeds set thresholds. Crucially, the “income” definition has been widen meaning that less people will be eligible or be eligible for a reduced amount.

If you are eligible and wish to claim a tax deduction on the contribution, you should complete the relevant notice. Remember that concessional contribution caps for 2009-2010 financial year is halve of the prior year’s cap. This cap includes SGC . So, you should take extra care not to exceed this cap.

The concessional contributions cap is $25,000. Those age 50 to 75 have a $50,000 cap. If you are age over 65, you may need to satisfy the work test.

Exceeding the contribution caps should be avoided as the taxation consequence is extreme, at the top marginal rate of 46.5 per cent.

Minimum income stream requirement

If you are in pension, including transition to retirement, make sure you have taken the minimum pension amount prior to 30 June (the money must leave the fund's bank account on or before 30 June). The minimum for 2009-2010 financial year is still halve the normal rate due to the temporary relief.

Avoid wash sale

You should not consider "wash sale". This is where you dispose an asset, such as shares, with the intention of generating a capital loss and reacquiring the same or substantially similar asset. The Tax Office has issued a Taxpayer Alert warning that the Part IVA anti-avoidance rules may be applied to deny the generated losses in cases where the asset is sold but there is no material change to the "economic exposure".

Avoid common traps:

  • Avoid directing employer to make larger one-off salary sacrifice contribution at year end based on maximum concessional contributions cap without taking into account the 9% SGC that have already been made throughout the year.
  • Avoid making use of the non-concessional bring-forward cap of $450,000 when not eligible. You are not eligible to the bring-forward cap if you are over 65 years of age.
  • Avoid making contributions if you are aged between 65 and 75, and you do not satisfy the work test. You are prohibited from making contributions once you reach age 75.

More information and contacting us

If you wish to discuss the above, please contact us. Our contact details.